Well, the futures markets showed stocks broadly lower this morning.
Japan's market is lower. Some of the red ink has washed into Europe,
which has many markets lower. The FTSE MIB seems to be getting
slaughtered, and the DAX, CAC and several others are down
substantially.

Currency markets are showing some interesting wrinkles. It looks to
me like there's been an attempt at "easing" (deliberate
depreciation's new euphemism) of the EU euro, the British pound, and
the Japanese yen. Evidently, Japan's central bank is meeting this
week to decide if they want to "go again."

I've previously noted that the market in September saw depreciation
of the yen followed by depreciation of the dollar. Guess who won
that round? The weaker dollar. I think that's what we're going to
see with the euro and pound, too.

If I'm not mistaken (and I frequently am) it looks like the major
central banks are trying to print their way out of the global
depression. That's certainly indicated by the political season in
the USA where congress critters are wanting to get re-elected. But,
of course, if everyone depreciates, things are going to go badly for
everyone.

There has been some pull back in oil, gasoline, gold, and silver.
These appear to me to be minor and profit-taking action so far,
today. Gold blasted lower well after the usual London "fix" which
suggests profit taking, rather than the usual price rigging. Of
course, it is always hard to know what is going on, and even
sometimes difficult to know what has been going on. However, if you
see 12 days in a row of new record high prices in gold, and 12 or
more days in a row of 30 year highs in silver, you ought to expect
some profit taking, which we are seeing this morning. Buy on these
dips if you have dollars to invest in gold or silver, or in mining
stocks. (See CaseyResearch.com for a bunch of fine mining stock
recommendationsLouis James is a very sharp guy.)

What should you expect, this month? October is a month with a good
bit of low in it. Some record crashes have happened in October. I
was expecting a much lower market in September, and I was wrong. The
market went higher in September 2010 than it has in any September
since 1939, they said on CNBC last week.

And we all have such fond memories of 1939, huh? Gee, what was it
that happened in September 1939? Something about Germany and Poland?
You could look it up.

But, yeah, I was wrong about September. The blush came off that rose
a bit in the last two trading days of the month, which are also the
last two trading days of the quarter. I think the currency game in
Japan and the USA played a role in the stock market rally, pushing
the crash that I think has been imminent from September into
October. Can they play these games and push things into November? I
don't know.

Obviously, really, I can't know. No one can predict interest rates
or monetary policy because they aren't based on rational
expectations or external forces (like spotless days in the Sunspot
cycle, for example) but on the whimsy of the Feral Reserveless
Scheme. We know that the Fed likes the establishment and wants to
keep Reid and Pelosi in office, so we have to suspect they'll keep
the printing presses rolling.

But we also cannot predict how the markets are going to react. Part
of that is because the whole world is trying to play "printing press
madness" with their currencies. So the Swiss and Swedish and
Australian and Canadian currencies seem to be doing somewhat well,
while the yen, dollar, euro, and pound circle the drain.

How about oil and gasoline? These prices were lower this morning,
too. Again, I think that's expected value. And the pull back is
probably going to be minor and brief. I think that's probably true
of gold and silver, as well.

Are we going to see the stock markets go "limit down" this month? It
isn't ever very likely, but there are a lot of bad things "out
there" which could send the markets into a selling frenzy. Ireland
has nationalised its two largest banks, I seem to have read
recently. The sovereign debt crisis isn't over, nor is it getting
better. Rioters are opposing the 'austerity' plans in several
European countries, and Ecuador. Nor is there much good news, really.

Zero Hedge ran an article recently on fraud at the Bureau of Labour
Statistics:
[link]

Housing starts are in the toilet. Maybe they aren't circling the
drain quite the way they were, but they aren't pulling the economy
either. [link]

So, I'm not sure what sector of the economy is going to "grow our
way out" of one of the worst economic bubble collapses in the last
300 years. I think, rather, we're going to see things slide along
for two or three years, and collapse further in 2012 or 2013. I
would put the bottom somewhere in 2017 to 2018.

Now, bottoming out, as the author of
"Fight Club"
was at some pains
to point out, isn't that bad a thing. Once you've given up all the
fantasies of hope and gotten some real clarity, you can decide what
it is you really want to do.

Bottoming out would be very good for the economy, in fact, because
it would liquidate all kinds of bad investments that were only
working because of the monetary bubble. There would be a strong
reaction against further monetary inflation, possibly leading to a
period of stability like Byzantium's solidus and the Caliphate's
dinar. Similar reactions followed the 1722 South Sea Bubble
bursting, and the 1785 Continental currency, as well as the
disastrous inflation in France during the national assembly and
directorate period.

Monetary stability is very good, economically, socially,
technologically, and culturally, I believe. People can save money
and rely on their savings. They can plan for the future. They can
invest sensibly. I believe the Italian Renaissance owes part of its
grandeur to the monetary stability leading up to it. And the period
of monetary stability from 1792 to 1933 led to dramatic economic
expansion and industrialisation in the USA. The period from 1722 to
1914 in Europe was similar in fostering economic growth and new
industries.

So when should you sell all your gold and buy stocks? Well, roughly,
2017 or so, maybe. You'll have seen a mania phase in gold and
silver. This mania phase will be ending when major publications show
a gold bull tearing apart the major stock exchanges. Stocks will
have been wiped out and many "blue chips" will be trading at or
below dividend yield.

Between now and then? Things are going to be very, very bad. People
are going to suffer.

Remember that the collapse of currencies also leads to
dictatorships. Weimar Germany fed the rage of the Nazis. The
collapse of the mandat led to Napoleon. The collapse of the
Continental led to Hamilton's constitutional convention, which was a
near thing as far as tyrannyand the anti-federalists thought it
was tyranny. After the 1722 collapse, there were two world wars. And
these days world wars can be very nasty.

Thus: prepare. Prepare for hard times. Prepare for things to get
actually worse than they are. Do your best to stay diversified so
your money is not all in dollars, your stocks are not all in one
sector. Do your best to have means of survival, like seeds, a place
to grow food, guns, ammo, a water well, and equipment to filter
water and air in case of urgent conditions.

In the long run, I'm very optimistic. I think the human race is a
marvellous thing, the potential for our technologies are amazing,
the universe is available for our expansion. But getting to the long
run isn't always easy. And the next seven or eight years are likely
to be very, very hard.

After I finished composing this essay on Monday, it became evident
that we were having quite a ride. Here are a few further thoughts as
the week progressed:

October 4 at 9:27am

My expectations for oil, gasoline, and silver have now been met.
Gasoline is flirting with $2.11 on the commodities market. That's
compared to $1.89 two weeks ago. (You pay much more owing to state
and federal taxes, plus whatever the wholesaler wants for profit;
retailers make no profit on gasoline.) This price in particular has
surged by 11.6% in two weeks. If that were to continue for a full
year (and demand probably wouldn't sustain such a long rally) it
would mean 302% rise in the price of gasoline.

Gasoline flirted with $2.12 before moderating. Stocks had a rally
and fell back. Oil seems to be heading higher. I'm not sure how
there is much basis for an economy. About the only thing that anyone
is producing is printing press dollars, it seems.

October 4 at 10:41am

Well, it looks like the red ink that spread from Japan to Germany to
the UK has crossed the Atlantic with the morning Sun. Stocks are
getting socked.

I thought it was hilarious to hear from Ford's CEO that sales in the
USA are going to rise... 3 to 5% a year for the next three years. Oh
yeah? Is that a reliable prediction based on consumer demand you
can't possibly predict, or is it simply that you sold next to no
cars at all in 2009, so 5% of nearly zero is a pretty tiny number?
lol

Tuesday 5 October at 3:15am

Good morning Bank of Japan! I see you've decided to "go again" for
October. More "easing" and a promise to keep interest rates at zero.
The yen has improved slightly against the dollar, but gold is way
up, again, new record high. Guess who thinks the Feral Reserveless
Scheme is going to respond to "easing" in Japan with more "easing"
of the dollar? Yep, gold bugs. We're such a heartless and cruel
bunch of filthy rich cynics.

Tuesday 5 October at 5:52am

If there's going to be a global stock market rally, it is going to
be artificial. And it is going to need an explainable intervention
rationale. So BoJ appears, to me, to be giving an excuse for
"quantitative easing" which is supposed to stimulate a stock market
rally. When the market runs up through 11,000 later this month
(before crashing, hard) I would not be surprised to see Democrat
politicians like Reid and Pelosi taking credit for it, claiming that
the stock market is a leading indicator, etc.

My own expectations, announced many months ago ("Anticipating Market
Behaviour" in my notes and on The Libertarian Enterprise) include a
much higher gold price this year and a stock market that cycles
between around 9,000 and around 11,500 to complete a right hand
shoulder in a huge head and shoulders formation. The left shoulder
ran from 1998 to 2003. The head formed from 2003 to 2008. The right
shoulder started forming in 2008 and should complete in 2013.
Possibly sooner.

Financial default is very likely, among many big companies and many
governments. We are seeing a low volume rally on the equities
markets right now. Low volume strongly suggests that this is a
banking and finance company rally, built on t...he weak dollar of
quantitative easing episode "two." If volume gets high, that would
mean many ordinary investors are joining.

Gold meanwhile has leapt up by about $20 an ounce today. Yes, the
Feral Reserveless Scheme has announced plans for more easing to
match Japan's easing, and there's no reason to imagine that gold
won't get to its "inflation adjusted" high of roughly $3,000
sometime in the next twelve months. My guess would be that 2011
might be a continuous rally much as 1979 was. Hard to be sure.

Silver has also been doing nicely. Should be $30 an ounce before the
end of the year, I think.

Tuesday at 3:57pm

So, the stock market rallied much higher this afternoon. There was
some pick up in volume. An analyst that I sometimes follow pointed
out that the rise in mainstream equities is directly mirrored by the
rise in the commodities index, meaning that adjusted for inflation
people are no better off.

One interesting "wrinkle" in the current rally in gold and silver is
that my friend Ed Steer who watches the silver market very closely
reported that JP Morgan Chase was folding up their short positions
in August. Yeah, they were warned.

6 October at 5:29am

When you are being oppressed by a group of oligarchs, does it really
matter who is at the top of their heap? The whole dog pile seems to
be dedicated to anally raping all of us, and each other. Among the
many difficulties with the "managed society" concept is that those
in power cannot be trusted with the power they wield.

Over 37,000 job cuts in September, but that is "64% fewer" than a
year ago, so things are getting ...better? Tens of millions of
Americans are still out of work, and more job cuts are being tallied
up, and how are things getting better? You know when the jobs market
has bottomed out when instead of job cuts you see job growth. And
bottoming out isn't a cause for celebration. It is still miserable
out there. And will be for many years.

I'm seeing reports of high afternoon volume on, e.g., the NYSE. This
seems to me to be late-rally buying, basically where the banks have
run the prices up and now want a bunch of suckers to bring it up
even higher by buying in late. You know, so the banking gangsters
can sell at a high price what they bought low in the morning.

Wednesday 5 October at 11:45am

Equities are mixed today. The Dow has flirted with a rally, but
nothing has sustained. The NASDAQ has been lower pretty much all
day. The broader markets like the S&P 500 and NYSE are also going
nowhere.

Meanwhile gold has rallied and silver is again above $23 per ounce.
Gasoline is over $2.16 a gallon. Heating oil, natural gas, and oil
are all higher.

Yesterday's rally has not extended to today, so, yeah, I think the
high volume in the late afternoon was all about unloading positions
on suckers. Sorry folks.

Today's action suggests that people are looking at the price rises
and seeing trouble ahead from the monetary inflation policy. Whether
this means a big drop sometime this month, as I anticipate, remains
to be seen. Remember that I anticipated a big drop last month which
didn't materialise.

However, I think it would be fair to say that yesterday's rally is a
fart in a hurricane that is going to blow away. Even if further
"easing" happens to prompt higher stock prices, even if Friday's
unemployment number is pure lies, I think we are going to see the
market struggle to get the Dow over 11,000 and I doubt if it will
brush 11,500.

Mind you, much more monetary inflation would make my prediction of a
right shoulder formation completing a total loss. As we see the many
days in a row of rising gold and silver (and copper, which I think
is beginning to be seen as another monetary alternative) turn into
many weeks in a row of rising prices, the inflation story is
becoming more widely understood.

Whatever happens in October, you can be sure that something dramatic
is coming for the day after the elections, when the votes are not
counted but vote totals are announced. On that day, the Fed has
another meeting. Having served its purpose, the current rally would
likely be cut short.

Thursday 7 October 2010 at 5:08am

Gee gold was up again this morning in overseas trading. India can't
seem to get enough. The high asking price at Kitco.com was 1365.70.
Even with some evident profit taking there is still a gap up of
about $10 an ounce. New record high in the gold price. Gee that
is...17 days in the current rally, many of which have been new
record high prices.

If you pay attention to the currency exchange wars you'll probably
be able to figure out when the rally ends. After which there should
be a Fibonacci re-trace. Whether that is this year, next year, or in
two years, I cannot guess. But I'll be watching.

Silver has also gapped higher this morning. Nineteen days of this
rally in silver. Not yet the record high but we're closing in on
half that value. (Record high in gold was roughly $895 intra-day on
the April gold futures contract in January 1980. Also in January
1980 the commodities regulators changed the rules and screwed the
Hunt brothers out of their fortune. They had taken a large fortune
and made it into a smaller one. Silver peaked at roughly $50 an
ounce.)

The Nikkei closed lower signifying an end to their rally. Why? Well,
gee, Jillickers, the yen is at a 15 year high against the dollar.
Good MORNING Bank of Japan. Your efforts to ease have failed
utterly. The Feral Reserveless Scheme has out-eased you. Instead of
seeing the yen depreciate on this round, the "go again" was almost
lost in the noise. The trend continues down. Hard.

Yesterday's Dow flirted with higher and lower all day, finally
succumbing to late afternoon buying, probably by the plunge
protection team, to end marginally higher. My guess is that was an
end of trend signal, in which case we'll get some sort of downward
motion on the Dow today. Broader markets like the S&P 500 were
lower, slightly. The NASDAQ closed down slightly.

Asian markets are mixed with Bombay way down, Shanghai up, Nikkei
down slightly, the Hang Seng flat. European markets are mixed,
mostly flat.

So my guess is that the steam is running out of this inflationary
move. Monetary inflation has ...stimulated some higher prices in
stocksbecause when the dollar is worth less you want to own a
dollar-denominated stock which has the potential for earnings, in
case the dollar becomes worth even less next week. Monetary
inflation in Japan, the USA, Japan, the USA, Europe, and Britain has
stimulated buying in oil, gasoline, natural gas, gold, silver, and
copper.

Inflation is here, and it is raging. Investors have to be thinking
about that. Which means that if they want money for Christmas
presents, they are thinking about selling something. Maybe bonds,
maybe stocks. Probably not their gold or ...silver, which look to be
making strong gains.

Earnings are being announced starting today. The early number on
jobless data was bad, yesterday, and we'll see what sort of lies the
Bureau of Labour Statistics wants to emit tomorrow. Meanwhile, if
earnings are low, then companies aren't going to be inspired to
spend much of the cash they have been hoarding. That is, until they
perceive that the value of the $2 trillion in cash companies have on
their balance sheets is going to become worth much less. At which
point they are most likely going to buy strategic inventories, like
commodities.

Meh, the lies about jobless claims are later this morning, not
tomorrow.

Friday 8 October

So, what next? Well, gold it another all time record high on
Thursday in early morning trading in Hong Kong and London. The rest
of the day was profit taking. So the price sailed down from $1365
per ounce to $1326 where it made a dead ca...t bounce back up to
$1335. It appears to be filling in gaps left by its long march
skyward.

What does this mean? Is the rally in gold over? Very likely not. I
think it is just starting to enter the mania phase. Finance.Yahoo is
now listing gold on its "US" financials screen. The Dow, NASDAQ, S&P
500, 10 Yr bond, Oil, Gold. In that order.

Monetary inflation is here, and until the debt is paid off (larf) or
defaulted upon, monetary inflation in one form another is to be
expected. Though you should expect some pretence at "restraint"
right after the election.

Meanwhile the stock markets all rolled to a dead halt this week.
Wednesday the NASDAQ was down. Today the NYSE, Dow, and S&P 500 were
all down. The Nikkei this morning is down further. The FTSE is down.

Silver meanwhile dropped about a dollar an ounce and is headed right
back up. I think the price drop was again profit taking. And the
drop is minor and brief.

Copper has been going up since the first week of June. I think many
investors are seeing it as a money choice, like gold or silver.
About 22 cents a pound came off the price today, but it looks to be
going right back up.

So, what if they come around to confiscate everything of value?
Think about copper tubing. You can put it up next to your existing
pipes, and it may escape notice. Or paint it grey.

Well, the governments in the uSA shed 159,000 or so jobs and the
economy was net down 95,000 jobs. Which bad news drove the Dow over
11,000 for the first time in months. Heh. Or maybe it was inflation?

Gold and silver are going back up, an...d gasoline was over $2.15
last I looked at the commodities market.

It has been a long time (1979) since gold could sustain a one day
drop of $40 an ounce and go right back up the next day. Which is
good to know, since we are in uncharted price territory. (What is
the inflation adjusted price of gold? The high in 1980 might
correspond to around $3,000 but that's while inflation is evidently
raging today. So...who knows?)

We've seen mild resistance at $1365 and we see definite support at
$1330. But I suspect that this information is only of short term
use, and the market is going to go higher next week. Yes, even the
Dow.

Silver is also right back up within a few cents of where it was when
it peaked yesterday. This is also great news, because the gold to
silver ratio is going to ameliorate as monetary inflation takes
hold. I would not be surprised to see a low in the ratio of ten
ounces of silver to buy one of gold. Near the peak, about three
ounces or less of gold should buy the Dow.

The Nikkei was down substantially on the much stronger yen. A strong
yen is bad for exporters as it makes Japanese goods comparatively
expensive. On the other hand if you think a weak dollar is good for
the USA, which imports a huge amount every year, then you'll enjoy
paying $4 a gallon for gasoline, again, soon.

Nothing in the balance of the week's trading convinces me that this
rally is based on fundamentals. It is based on monetary inflation
creating dollars looking for a place to earn income while the system
melts down. It seems to be politically motivated, to "help" before
the mid-term election in November. From some of the polls, it looks
like between 50 and 100 seats may change hands in the house.

Jim Davidson is an author, entrepreneur, and anti-war activist. His
1990 venture to offer a sweepstakes trip into space was destroyed by
government action as was his free port and prospective space port in
Somalia in 2001. His 2002-2007 venture in free market money and
private stock exchange was destroyed by government action in 2007.
He's going to Mars if he has to walk. His second book, Being
Sovereign is now availble from
Lulu and
Amazon.
His third book Sovereign Self-Defense will be released for
Kindle soon. His fourth book Being Libertarian will be
available for free download as a .pdf, being a compilation of all
his essays and letters in "The Libertarian Enterprise" since 1995.
Contact him at indomitus.net or
indsovu.com
He and his associates at Individual Sovereign University are
planning a series of concerts and celebrations of freedom around the
world. One of these events is 4-6 March 2011 in Kansas City,
Missouri.

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